Bolivia begins the decade in political stability and prosperity under a liberal president. The rise of tin production, presided over by a few Bolivian tin magnates, causes social tensions as mining laborers live in precarious conditions. When World War I leads to a decline in mineral exports, support for a new Republican Party increases. A bloodless coup in 1920 puts Republicans in power.
The Republicans split into factions, some Socialist- and Marxist-influenced. Tin prices decline, slowing economic growth. Bolivia relies heavily on foreign loans, despite nationalist opposition to favorable terms for lenders. Labor and Indian uprisings are suppressed. A military junta overthrows President Siles Reyes, then allows elections that give reformist Daniel Salamanca the presidency.
President Salamanca fails to suppress social unrest or solve the economic problems the Depression engenders. In 1932 he leads Bolivia into a three-year war with Paraguay in a border dispute over the Chaco area and its oil fields. An armistice grants Paraguay most of Chaco and Bolivia some oil fields. Loss of life and territory discredit the traditional ruling class and prompt a military coup.
Coup leader Colonel David Toro attempts a program of "military socialism," but he is overthrown by a coup led by the more radical Colonel Busch. A new constitution favors government intervention in social and economic affairs. Busch alienates the conservatives and finds little popular or military support, and he commits suicide. Elections replace him with General Enrique Peñaranda.
Peñaranda's support comes primarily from the traditional Liberal and Republican parties, but new socialist and leftist groups gain control of Congress. The main opposition comes from the Nationalist Revolutionary Movement (MNR), with support from intellectuals and workers. With the help of reformist military officers, the MNR overthrows Peñaranda and replaces him with Major Villaroel.
Villaroel resumes the reformist policies of Toro and Busch, but fails to gain the support of the miners and peasants who make up the majority of the labor force. Increasing political terrorism and rivalry between the MNR and the military further undermine his regime. In 1946 students, teachers, and workers seize arms, capture and kill Villaroel, and take over the presidential palace.
Social unrest and economic decline intensify under three successive Conservative governments. The tin industry stagnates, the inflation rate rises, and food imports increase. The MNR, the dominant opposition group, sides with workers and native-population Indians. After several failed attempts, in 1952 the MNR succeeds in overthrowing the government. Víctor Paz Estenssoro is made president.
The Bolivian National Revolution begins. President Paz Estenssoro establishes universal suffrage. The government reduces the armed forces' size and budget. The three major tin companies are nationalized, to be run by the Mining Corporation of Bolivia (Comibol). Strongly influenced by peasants, the government enacts sweeping agrarian reform. Miners organize the Bolivian Labor Federation (COB).
Representing the MNR's right wing, new president Hernán Siles Zuazo continues the revolution. He turns toward the stagnant economy and, under advice from the IMF, freezes wages and implements a stabilization plan. Weakening relations between the MNR and the COB are further damaged when Siles Zuazo rebuilds the armed forces to quell unrest. A group from the MNR forms the Authentic MNR (MNRA).
The revolution loses momentum. Paz Estenssoro returns as president, but conflicts within the MNR and corruption grow. Paz Estenssoro loses the support of the left when he restructures the tin industry, ends workers' control over Comibol, and reduces salaries. Vice President General René Barrientos receives military assistance in occupying the presidential palace and assumes the title of president.
Despite promises to the contrary, Barrientos continues his predecessor's policies. The economy improves, aided by rising tin prices. Barrientos encourages private and foreign investment. His attempts to control labor anger miners. Che Guevara's radical guerilla movement is set back when troops kill him in 1967. Barrientos dies in a helicopter crash, and General Ovando takes power in a coup.
In the spirit of "revolutionary nationalism," Ovando nationalizes the U.S.-owned Gulf Oil Company, but workers don't want to cooperate with a military government. The military itself is polarized, and reformists now support a more radical general who overthrows Ovando. Lacking authority, strategy, and political experience, he is quickly ousted in a military coup led by Colonel Hugo Banzer.
Growing exports and foreign borrowing fuel strong economic growth until 1976, when oil production declines and cotton prices fall. The governing alliance disintegrates. Banzer announces the formation of a "new Bolivia" under increasingly repressive military rule, especially brutal to the left. Elections in 1978 are annulled due to fraud, and Banzer's candidate carries out a coup.
A series of military governments rules briefly, each overthrown by the next. Political parties are fragmented, the armed forces divided, and austerity measures provoke social unrest. Arrests, torture, and disappearances destroy the opposition. The government takes part in cocaine trafficking. Under growing pressure, the military allows the 1980 Congress to choose Siles Zuazo as president again.
The political arena is characterized by infighting and corruption. The international recession and domestic fiscal mismanagement put the Bolivian economy in a state of crisis. The government prints money, fueling inflation. Per capita income falls below 1965 levels, with more than half the labor force employed in the informal sector. Paz Estenssoro is elected president again.
Shifting his focus away from the center left that elected him, Paz Estenssoro institutes a drastic New Economic Policy that liberalizes trade, deregulates the financial sector, privatizes some state enterprises, and implements tax-reform law. These "shock therapy" measures succeed in reducing record inflation and bringing about slow but steady economic growth. Success comes at a high social cost.
Jaime Paz Zamora, Paz Estenssoro's nephew, is elected president. He continues his uncle's neoliberal reforms, maintaining slow economic growth. Cocaine trafficking contributes illegally to the economy. Social tensions explode in a series of forcefully suppressed strikes for higher wages and against privatization. Sánchez de Lozada, architect of the shock therapy program, is elected president.
Sánchez de Lozada enacts political decentralization, granting municipalities more control over revenues. Heeding international concern for the environment, the government implements a coca-eradication program. Capitalization of several state enterprises brings economic growth in capital-intensive sectors. Banzer returns as president after more civil disturbances, promising greater social equity.
The Brazilian and Asian financial crises bring Bolivia's slow economic growth nearly to a halt. Income per capita falls further as unemployment rises. Bolivia participates in a World Bank/International Monetary Fund debt reduction initiative for heavily indebted countries.
Economic stagnation takes hold in the wake of the Asian crisis and amid global slowdown. Frustration grows at the apparent failure of market reforms to relieve poverty. The government deploys soldiers to stop protests. Indian and coca growers' movements gain popularity. An ailing Banzer resigns; his vice president takes over. Former president Gonzalo Sánchez de Lozada returns to the office in 2002.
Free trade policies are reversed when President Gonzalo Sánchez de Lozada's plan to spur growth by exporting natural gas to foreign markets sparks deadly riots. The original architect of Bolivia's economic "shock therapy" is forced to flee the country in October 2003. His successor, Carlos Mesa, reverts to protectionist policies under pressure from coca growers, labor, and indigenous groups.
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